Search This Page

Trivial Benefits: Tax-Free Gifts For Employees

From a business perspective, there is not much to be merry about this year especially if you need some clarity regarding our impending exit from the EU. Never-the-less, business owners would be wise to consider the tax-free gifts that can be made to ease the financial needs for extra funds over the festive season.

In particular, make the most of the trivial benefits allowance. Here’s what is available and how you can benefit:

Trivial Benefits Allowance

You don’t have to pay tax on a benefit for your employee (including working directors – but see note below) if all of the following apply:

• it costs you £50 or less to provide • it isn’t cash or a cash voucher • it isn’t a reward for their work or performance • it isn’t in the terms of their contract

This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HMRC know.

Be careful as:

• you may have to pay tax on any benefits that don’t meet all these criteria, and • if you provide these benefits as part of a formal salary sacrifice arrangements, they won’t be exempt.

Special rules for directors of ‘close’ companies

As you might expect, HMRC is not keen for owner/directors of small companies to benefit unduly from these tax-free benefits. Accordingly, you can’t receive trivial benefits worth more than £300 in a tax year if you are the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.

If you’re still unsure on how Trivial Benefits work, contact us today to speak to a member of our team.